In a Credit Transaction, the Possessor of Money (Useful Present Good) Exchanges It for an “I Owe You” (Future Good)

None of this discussion is meant to impugn the general practice of credit, which has an important and vital function on the free market. In a credit transaction, the possessor of money (a good useful in the present) exchanges it for an IOU [an I Owe You, a debt] payable at some future date (the IOU being a “future good”) and the interest charge reflects the higher valuation of present goods over future goods on the market. But bank notes or deposits are not credit; they are warehouse receipts, instantaneous claims to cash (e.g., gold) in the bank vaults. The debtor makes sure that he pays his debt when payment becomes due; the fractional reserve banker can never pay more than a small fraction of his outstanding liabilities.

—Murray N. Rothbard, What Has Government Done to Our Money? (Auburn, AL: Ludwig von Mises Institute, 2010), 46-47.